Equities Extend Gains on Renewed Investor Confidence

Last week was another one to be remembered by investors in the Nigerian equities market as the Federal Government finally made good its promise to grant forbearance to highly indebted dealing member firms of the Nigerian Stock Exchange (NSE).

The intervention helped the stock market extended the gains recorded the previous week as the market witnessed increased patronage following renewed investor confidence, which has before now remained unstable.

After two week of dismal performance, the Nigerian equities had the previous week returned to positive territory as more investors increased their exposures to the equities market due to the recent fall in bond yields.

Trading resumed last Monday on a poor note as most investors rushed to take profit following the previous week’s gains. It however recorded marginal gains the next day following drive by bargain hunters to take position for gains.

On Wednesday, the N22.6 billion forbearance granted highly-indebted dealing members of the NSE did not have a significant impact on the market as activities on the exchange decreased by five per cent despite growth in market indices.

Stock prices on the exchange rose Thursday as the market extended the gains of prior trading days, a reflection of the improved investor confidence following government’s commitments to restore the capital market via relevant reforms and policies. Albeit, some stockbrokers are wary of the stringent conditions attached with the forbearance palliatives recently announced by the federal minister of finance.

At the close of business last Friday, activities on the stock exchange increased by 19 per cent in conjunction with growth in market indices as investors bought more shares. This is despite the news of Gboko Cement Plant shutdown by Dangote Cement Plc.

Dangote Cement Plc had last Thursday announced the temporary shutdown of its Gboko Plant situated in Benue state. The plant has an annual production capacity of 4 million metric tonnes (mmt), remains the smallest plant of the continent’s biggest cement manufacturer and the country’s biggest company by market value. The company hinged the decision on the recent glut of imported cements in the Nigerian market especially in the South-eastern region, which is Gboko plant’s major market. The company claimed this situation has negatively impacted on sales volumes causing inventory level to increase.

However, most market indicators at the stock market closed the week firmer, led by the twin market gauge-the NSE All-Share Index (ASI) and the market capitalisation.
The ASI appreciated by 0.67 per cent to close at 26,671.72, while market capitalisation of listed equities went up by 0.67 per cent to close at N8.522 trillion.

Five of the sectoral indices appreciated during the week: the NSE- 30, the NSE Consumer Goods, the NSE Banking, the NSE Insurance and NSE Lotus II Indices appreciated by 1.27 per cent; 2.37 per cent; 2.43 per cent; and 0.75 per cent in that order. But the NSE Oil/Gas index dropped by 2.11 per cent.

Market Turnover
A further review of the exchange’s trading numbers showed that investors sold a total of 1.144 billion shares worth N11.239 billion in 18,947 deals in contrast to a total of 1.216 billion shares valued at N8.886 billion that exchanged hands the previous week in 18,902 deals.

The financial services sector (measured by turnover volume) accounted for 872.712 million shares valued at N6.803 billion traded in 11,398 deals. The consumer goods sector followed with 75.609 million shares valued at N3.117 billion traded in 3,812 deals.

The banking subsector of the financial services sector was the most active during the week (measured by turnover volume); with 645.733 million shares worth N5.555 billion exchanged hands by investors in 8,257 deals. The volume of shares sold in the banking subsector was largely driven by activities in the shares of Zenith Bank Plc and Access Bank Plc.

Trading in the shares of the two banks accounted for 196.229 million shares, representing 30.39 per cent 22.49 per cent, and 17.15 per cent of the turnover recorded by the subsector, sector and total turnover for the week, respectively.

Also traded during the week were 611 units of NewGold Exchange Traded Funds (ETFs) valued at N1.591 million exchanged hands in five deals in contrast to a total of 550 units valued at N1.462 million transacted last week in five deals. Also, 4,650 units of FGN Bonds valued at N5.008 million were traded during the week in 12 deals. However, there were no transactions in the State/Local Government Bonds and Corporate Bonds/Debentures sectors.

Stockbrokers Applaud FG
Meanwhile, the capital market community led by the Chartered Institute of Stockbrokers (CIS) and leading dealing members of the Nigerian Stock Exchange (NSE), during the week under review hailed the N22.6 billion forbearance granted to 84 stockbroking firms.
Stockbrokers who spoke to THISDAY expressed joy at the development and unanimously agreed that the move was the necessary step needed to take the capital market to where it was in 2008.

The Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, at a news conference in Abuja last week announced the Federal Government decision to grant waiver to 84 highly- indebted stockbroking firms.
Okonjo-Iweala said the move became necessary following the debt hang-over in the capital market.

The debt hang-over, she claimed had made the market non-vibrant in the past few years.
She however warned that the waiver would also be accompanied with sanctions to discourage excessive borrowing by capital market operators in the future.

Reacting to the news, President of Chartered Institute of Stockbrokers (CIS), Mr. Ariyo Olushekun, said the forbearance is a welcome development that would help in sustaining the recovering being witnessed in the market.

According to him, this is something the stockbroking community has been asking for, saying the Federal Government must be commended for acceding to the request, which he said had demonstrated the government commitment to the development and growth of the market.

“The forbearance is a fantastic development that is highly welcomed by the stockbroking community. The immediate effect it would have on the broking firm is to improve their balance sheet and bring it to positive. After this they can recapitalise and begin proprietary trading and contribute to the flow of activities in the market,” Olushekun said.

He said that while there were other things needed for the market to attain full recovery, he noted that the forbearance was a good move that would sustain the recovery.

"The stockbroking community is grateful to the Federal Government, members of the committee that make this forbearance possible," he said.

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